The present invention relates generally to a credit card billing system used by retailers who sell goods or services, and more particularly, to an improved billing system which facilitates the placement of charges for such goods or services on a credit card billing statement in such a manner as to reduce the likelihood that the customer will request further information regarding the purchased goods or services.
Direct marketing and other forms of remote retailing have become effective tools in the sale of many products and services. It has been found that direct marketing is particularly effective for selling certain types of products and services, including magazine subscriptions and membership services, as evidenced by the success of such direct marketing companies as NewSub Services and CUC International, each of Stamford, Conn.
Even when such remote retailers are initially successful in inducing a consumer to purchase certain goods and/or services, often at considerable expense, the remote nature of the transaction itself, including the time lapse between the purchase, delivery and billing events, tends to promote xe2x80x9csecond guessingxe2x80x9d on the part of the consumer when the credit card billing statement finally arrives. Thus, many remote retailers experience a very high cancellation rate. Remote retailing of membership services, for example, can exhibit cancellation rates as high as fifty percent (50%) of total charges.
Consumers often purchase such goods or services with a limited understanding of the cost, or to obtain a free incentive being offered by the remote retailer to induce the purchase of the goods or services. Thus, when the charge for the purchased goods or services ultimately appears on the consumer""s credit card billing statement, the consumer often questions the purchase.
When a charge is made to a credit card, remote retailers typically include a toll-free customer service telephone number, as part of the information printed on the credit card billing statement, together with the merchant name, a description of the goods purchased and the total cost of the goods. In this manner, inquiries about the charge may be directed to the appropriate merchant, as opposed to the credit card issuer, and the remote retailer may thereby have an opportunity to xe2x80x9csave the sale.xe2x80x9d Upon receipt of the credit card billing statement, and seeing the total charge for the purchased goods or services, consumers will often xe2x80x9csecond guessxe2x80x9d their initial purchase, and call the indicated customer service number to cancel the purchased goods or services.
The tendency of the consumer to xe2x80x9csecond guessxe2x80x9d their initial purchase is often compounded by the consumer""s unfamiliarity with the name of the remote retailer. In addition, this tendency is further compounded by the industry practice of aggregating all of the individual goods and services purchased at a single time for billing purposes and providing a generic description of the purchased goods and services, such as xe2x80x9cmagazinesxe2x80x9d or xe2x80x9cmembership servicesxe2x80x9d, with an aggregate amount for all of the purchased goods and services. For example, a consumer who orders an annual subscription to Time magazine and People magazine for $15 and $28, respectively, from NewSub Services, might see a total charge for $43 from NewSub Services labeled xe2x80x9cMagazinesxe2x80x9d on the consumer""s credit card billing statement.
Thus, the consumer""s unfamiliarity with the name of the remote retailer, such as NewSub Services, may trigger a telephone call to the indicated customer service number, to investigate the source or particulars associated with the charge. In addition, because all of the purchased goods and services are grouped together for billing purposes, the larger total amount indicated on the credit card billing statement will receive additional scrutiny from the consumer. If a consumer purchases multiple cancelable items on a credit card, the aggregation of the cost of individual items into a total amount for billing purposes stimulates higher cancellation rates for the remote retailer, especially as the total amount of the charges increases. In any event, once the consumer is on the phone with the customer service organization, the consumer has an easy opportunity to cancel the purchased goods or services. In addition, when all items are aggregated together in this manner, the consumer is more likely to cancel the entire order and request a refund of the total amount, rather than just canceling one or more individual items which make up the components of the total charge.
While many merchants offer installment and/or deferred billing plans, such conventional plans do not permit the merchant to separately bill a customer for each individual item purchased as part of a multiple-item order. In addition, such conventional installment and deferred billing plans do not stagger the billing of such individual items within an overall order, such that the smaller amount associated with each individual item indicated on the credit card billing statement will be interspersed with other purchases and thereby receive reduced scrutiny from the consumer.
As apparent from the above deficiencies with conventional credit card billing systems, a need exists for a credit card billing system which produces a credit card billing statement having improved billing information, thereby reducing the likelihood that a consumer will call the retailer for customer service purposes. A further need exists for a credit card billing system that permits a retailer to break up the total charge into individual line items for billing purposes, each having a description of the associated product and a different customer service number.
Generally, according to one aspect of the invention, a customer who purchases multiple cancelable items as part of a single transaction or order from a merchant will be separately billed on an account for each individual good or service in accordance with a payment schedule designed to minimize cancellation of the overall order by the customer. According to a further feature of the present invention, the billing descriptor which ultimately appears on the credit card billing statement of the customer will have sufficient detail to minimize the likelihood that the customer will subsequently contact the merchant to investigate the source of the charge. In one preferred embodiment, the billing descriptor will include a different customer service number for each individual item encouraging the customer to focus on individual understandable items instead of one amorphous bill.
A customer purchases a plurality of goods or services from a merchant in a conventional manner. As part of the transaction between the customer and the merchant, the customer will provide the merchant with a list of the multiple cancelable items included in the order, as well as credit card information. After the merchant has received an approval for the credit card purchase from the credit card issuer, the merchant will fulfill the order to the customer.
In accordance with a feature of the present invention, the merchant will preferably implement a charge cancellation reduction process to establish a staggered billing schedule for each item in the order. The established schedule is preferably stored in a billing schedule database. The cancellation reduction process permits multiple cancelable items purchased as part of a single order to be separately billed on a credit card. In one embodiment, the billing schedule delays billing of each item until at least one item is initially received by the customer and thereafter staggers the billing of each remaining item by a predefined period.
Thus, in order to receive payment for the purchased goods or services, the merchant transmits a charge request communication to a credit card issuer for each item, typically via a third party credit card processor, in accordance with the established billing schedule. The data transmitted by the merchant to the credit card issuer typically includes a merchant identification number, the detailed billing descriptor, customer credit card number, and the purchase amount. In one embodiment, the billing descriptor preferably includes an indication of the reference number associated with the customer""s order, the name of the merchant, a detailed product descriptor identifying the individual item, and a customer service telephone number unique to the item.
Upon receipt of the charge information, the credit card issuer initially evaluates the credit card number to determine whether the received number is a valid number, and thereafter determines whether the purchase price is within the pre-established available credit limits for the customer""s account. If the purchase price is within the pre-established available credit limit for a valid customer account, the credit card issuer then deducts the amount from the available credit limit, and transmits an authorization number back to the merchant, via the credit card processor. The credit card issuer will then initiate the transfer of the purchase amount, less a handling fee, to the pre-established merchant account at the merchant""s bank.
A more complete understanding of the present invention, as well as further features and advantages of the present invention, will be obtained by reference to the following detailed description and drawings.